The present invention relates to a method and system for facilitating a sale of debt using a computer network.
The market that processes bad or charged-off debt receivables has grown substantially in recent years. Representing a shift in the paradigm of the creditor processing methods of charge-offs, bad debt sales have become typical in the world of credit collection as an alternative and competing process to traditional agency placements. However, the lack of an organized market for the sale of debt accounts, combined with the complexity of the asset, has heretofore hindered debt sales.
Debt accounts are complex asset and many factors affect the value of a portfolio of debt accounts. For example, each of the following criteria must be considered to accurately access a portfolio's value: i) the type of accounts (e.g., credit card accounts, consumer loans, auto loans, commercial loans, mortgages, student loans, retail accounts, telecommunication accounts, utility accounts, bad checks, bankruptcy judgments, etc.); ii) identity of the lending institution or original account holder; iii) the placement level, or the number of agencies that have attempted to collect on the accounts (e.g., at charge-off, after firsts, after seconds, after thirds, etc.); iv) the geographic origin of the accounts (e.g., country, region, state, city, zip code, etc.); v) the principal value of the portfolio; vi) account balances; vii) age of the accounts; viii) selling institution; ix) purchase contract terms (e.g., representations and warranties).
Given the many factors that affect the value of a portfolio of debt accounts, the ability to communicate and receive accurate information relating to the debt accounts is critical to the buying and selling process. However, there has been no effective standardization in the language used to communicate information relating to debt accounts being offered for sale. Heretofore, sellers of debt accounts have generally organized the accounts into a portfolio and then created non-standardized description for the portfolio.
The lack of a standardized system has a number of drawbacks. For example, when advertising a portfolio for sale the seller may not provide all of the critical information that the buyer needs to properly access the value of the accounts. In addition, because of the lack of standardization, information provided by the seller may be misinterpreted by the buyer. For example, the buyer's definition of terms such as “consumer loans” or “after firsts” may differ significantly from the seller's definition. The lack of standardization under the present system has generally made the selling of debt accounts a difficult and time-consuming process in which the potential buyer must conduct a significant amount of due diligence before an assessment of the value of a debt portfolio can be made. As a practical matter, the time and expense of assessing the value of a debt account under known systems has prevented many potential smaller buyers from entering the debt market. Thus, there is a strong need for a standardized system of communicating information relating to debt accounts being offered for sale.
Another disadvantage of presently used methods for selling debt accounts is the manner in which accounts are grouped into portfolios. For example, prior to the present invention, there has been no effective methodology for considering sales demand when grouping accounts into portfolios. Sellers have generally selected arbitrary factors to group accounts or have grouped them randomly. By failing to consider sales demand for the particular grouping of accounts, sellers may delay sales by failing to take advantage of current market demand. By way of example, a seller (without information regarding current market demand) may package a portfolio containing debt accounts from all states, a portfolio for which no current market demand exists. However, had the seller known, for example, of a market demand for similar portfolios of accounts limited to particular regions, the seller could have packaged the portfolio to meet market demand. Thus, there is a strong need for an improved system and method for grouping debt accounts into portfolios or lots for sale.
Another shortcoming of present methods for selling debt accounts is the lack of an efficient means of regrouping account portfolios. Heretofore, sellers have generally grouped accounts into portfolios and offered the portfolio for sale. If the structure of the portfolio did not meet the buyer's need, there has generally been no effective means for regrouping the accounts into a new portfolio to meet the market demands. Furthermore, if a seller and a buyer have reached an agreement as to the purchase of a portion of a portfolio, there has been no efficient means for the seller to regroup the unsold accounts into a new portfolio. Because of these limitations of presently known methods, most debt accounts are grouped into portfolios by the seller and sold as an “as is” package to buyer, regardless of the buyer's need. Thus, there is a strong need for a method and system for regrouping lots to meet sales demand.
Another shortcoming in presently known methods for selling debt accounts is the lack of automation. Heretofore, there has been no automated method or system for grouping accounts into portfolios or lots for sale, allowing potential buyers to search for lots meeting their needs, accepting purchase offers from potential buyers and communicating those purchase offers to sellers. There is a strong need for an effective automated method and system to carry out these and other transactions necessary to complete an account sale. Thus, there is a strong need for an effective automated system for facilitating the sale of debt accounts.
Another of the many disadvantages of presently known methods for selling debt accounts and other types of assets is the lack of an effective means for the buyer to completely leverage its buying power. For example, under conventional buying systems and methods, a buyer with $100,000 in funds available is generally limited to extending bids totaling $100,000 (without obtaining credit). Thus, for example, if the buyer extends two bids for $50,000, the buyer is unable to place any further bids without running the risk of over extending himself. There is a strong need for a method and system that would further extend the buyer's ability to ensure a successful purchase by enabling redundant extension of the buyer's capital resources without compromising capital budge constraints.